Hargrave v. Oki Nursery, Inc.

Citation646 F.2d 716
Decision Date15 April 1981
Docket NumberNo. 43,D,43
PartiesAlexander M. HARGRAVE and Long Island Vineyards, Inc., a New York Corporation, Plaintiffs-Appellants, v. OKI NURSERY, INC., a California Corporation, Defendant-Appellee. ocket 80-7298.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Before MANSFIELD and MULLIGAN, * Circuit Judges, and NICKERSON, District Judge. **

NICKERSON, District Judge:

The court's opinion of December 19, 1980, held that plaintiffs' first claim, asserting fraud, alleged a "tortious act without the state causing injury to person or property within the state" and thus justified in personam jurisdiction over defendant under New York Civil Practice Law and Rules (CPLR) § 302(a)(3). In a petition for rehearing defendant contends that the district court on remand has no power to consider the second through sixth claims, which are based on essentially the same facts as are alleged in the first claim and assert breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of warranty of fitness for a particular purpose, and negligent performance of the contract. Defendant argues that New York law prohibits consideration of any but the fraud claim and should be applied.

There is no constitutional issue as to whether the district court has subject matter jurisdiction and personal jurisdiction over the defendant with respect to all the claims. The parties are citizens of different states, and defendant clearly had sufficient contacts with New York to justify subjecting it to the entire action in New York. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). However, the New York Court of Appeals in Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 324, 425 N.Y.S.2d 783, 785, 402 N.E.2d 122, 124 (1980), held that CPLR § 302(a)(3) did not confer jurisdiction over a defendant as to a breach of contract claim factually related to but conceptually independent of the alleged tort giving rise to personal jurisdiction. The question is whether Congress has authorized the district court, despite the state holding, to adjudicate the claims based on theories different from the fraud theory on which service under CPLR § 302(a)(3) was based.

Rule 4(e) of the Federal Rules of Civil Procedure provides, in pertinent part, that whenever a state statute provides for service of a summons upon a party not an inhabitant of or found within the state, service may be made "under the circumstances and in the manner prescribed in the statute." Accordingly service on defendant was made under CPLR § 302(a)(3), the circumstances being that defendant allegedly committed a fraud without the state causing injury within. This court's opinion establishes that the circumstances alleged satisfied the requirements of § 302(a)(3) and that service on the defendant was valid. The present issue is therefore not whether defendant can be brought before the court, cf. Arrowsmith v. United Press International, 320 F.2d 219 (2d Cir. 1963), but whether plaintiffs may now advance as applicable to the same basic facts various legal theories in addition to the fraud theory on which service was based. Rule 4(e) does not address itself to this problem, and we must look elsewhere for an answer.

If all of plaintiffs' claims derive from a common nucleus of operative fact such that they would ordinarily be expected to be tried in one judicial proceeding, they comprise one "case" within the meaning of Article III, Section 2, of the United States Constitution. United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Of course, the Constitution itself does not confer jurisdiction of a "case" on the district courts. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). However, Congress has implemented Article III by providing in 28 U.S.C. § 1332, so far as pertinent, that the district courts shall have jurisdiction of all "actions" between citizens of different states where the matter in controversy exceeds the requisite sum. Congress used the same wording in granting subject matter jurisdiction over civil "actions" of other kinds, for example, those asserting a claim arising under the Constitution, laws or treaties of the United States, 28 U.S.C. § 1331, or under the anti-trust laws, 28 U.S.C. § 1337, or under the patent, copyright or trademark laws, 28 U.S.C. § 1338, or under the civil rights legislation, 28 U.S.C. § 1343, or under the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, or under the Labor Management Reporting and Disclosure Act, 29 U.S.C. § 412.

The word "action" has been commonly understood to denote not merely a "claim" or "cause of action" but "the entire controversy," and is so used in the Federal Rules of Civil Procedure. Harvey Aluminum, Inc. v. American Cyanamid Co., 203 F.2d 105, 108 (2d Cir.), cert. denied, 345 U.S. 964, 73 S.Ct. 949, 97 L.Ed. 1383 (1953). Thus where Congress has used the term "actions" or "action" the courts have consistently permitted the district courts to consider state claims where the criteria set forth in United Mine Workers of America v. Gibbs, supra, have been met. An "action" has been treated as equivalent to a "case" in the constitutional case. See, e. g., Hagans v. Lavine, 415 U.S. 528, 536-43, 94 S.Ct. 1372, 1378-82, 39 L.Ed.2d 577 (1974) (civil rights); Leon Finker, Inc. v. Schlussel, 469 F.Supp. 674, 679-80 (S.D.N.Y.) aff'd, 614 F.2d 1288 (2d Cir. 1979) (trademark); International Controls Corp. v. Vesco, 593 F.2d 166, 175 n. 5 (2d Cir.), cert. denied, 442 U.S. 941, 99 S.Ct. 2884, 61 L.Ed.2d 311 (1979) (securities); Klein v. Tabatchnick, 610 F.2d 1043, 1051 (2d Cir. 1979) (securities); Rosario v. Amalgamated Ladies' Garment Cutters' Union, 605 F.2d 1228, 1247 (2d Cir. 1979), cert. denied, 446 U.S. 919, 100 S.Ct. 1853, 64 L.Ed.2d 273 (1980) (labor); Newburger, Loeb & Co., Inc. v. Gross, 563 F.2d 1057, 1073 (2d Cir. 1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 782 (antitrust).

It is therefore clear that by giving jurisdiction over an "action" to enforce a federal right Congress granted the district courts power also to consider state law claims provided they had a nucleus of pertinent facts in common with a substantial federal claim. Indeed, where the "action" is brought under Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, to enforce a liability under the Act, this court has held that the district courts have personal jurisdiction over defendant as to state law claims although the defendant would not be subject to service in a state action on those claims. International Controls Corp. v. Vesco, 593 F.2d 166, 175 n. 5 (2d Cir.), cert. denied, 442 U.S. 941, 99 S.Ct. 2884, 61 L.Ed.2d 311 (1979) and cases cited. See also Robinson v. Penn Central Co., 484 F.2d 553, 555-56 (3d Cir. 1973); Oetiker v. Jurid Werke, G.m.b.H., 556 F.2d 1, 4-5 (D.C.Cir.1977).

Presumably Congress used the word "actions" in 28 U.S.C. § 1332, granting diversity jurisdiction, in the same sense as it is used in Section 27 of the Securities Exchange Act of 1934. Use of the same language in various enactments dealing with the same general subject matter, here the jurisdiction of the federal district courts, is a strong indication that the statutes should be interpreted to mean the same thing. See, e. g., Northcross v. Board of Education, 412 U.S. 427, 93 S.Ct. 2201, 37 L.Ed.2d 48 (1973).

There is no reason of policy requiring a different reading. The federal judiciary has an obvious interest in every litigation in having the whole case tried at one time. See, e. g., United States v. California & Oregon Land Co., 192 U.S. 355, 358, 24 S.Ct. 266, 267, 48 L.Ed. 476 (1904); Baltimore S.S. Co. v. Phillips, 274 U.S. 316, 320, 47 S.Ct. 600, 602, 71 L.Ed. 1069 (1924); United Mine Workers of America v. Gibbs, supra, 383 U.S. at 725 n. 13, 86 S.Ct. at 1138 n. 13; Rule 18(a) of the Federal Rules of Civil Procedure (permitting a party asserting a claim in a civil action to join "as many claims" as he has). The unified federal courts certainly have a stake in discouraging duplicative litigation not...

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    ...The federal judiciary has "an obvious interest in every litigation in having the whole case tried at one time." Hargrave v. Oki Nursery, Inc., 646 F.2d 716, 720 (2d Cir. 1980).Incorporation by reference is a different doctrine. It "takes several forms, depending on whether the primary docum......
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